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A landlord's world

Jun 23, 2023

There is a debate in Quebec that might shock other North Americans. Perhaps also Europeans, if some of my friends' stories of abuse by European landlords are any indication.

Quebec's housing laws are surprisingly equitable towards renters. Rented housing is considered home, so eviction is complicated and requires very good reasons. Rent increases can be refused, and the onus to justify an increase is on the landlord. And when the renter wants to leave their dwelling, they can simply give their contract to someone else. The landlord has two weeks to refuse, and the onus is also on them to justify a refusal.

This code is a big reason why renting in Quebec is so much less expensive than elsewhere. But some people think it goes to far. Friends mentioned that a housing unit is a lot of responsibilities, including financial ones, and comes with uncertainty. And recently, when the government has come up with a reform that would abolish the right to transfer a contract to a new renter, the minister (who is a landlord herself), invoked the right to freely enjoy one's property. Finally, I sometimes hear suggestions that the law has swayed too much on the side of renters, and that it is inequitable.

Each of theses arguments are based on some misunderstanding.

A house, or any dwelling, is indeed a big responsibility. I just bought one, and I can attest it's a nightmare. Every bad move could translated into tens or even hundreds of dollars of loss in 10 or 20 years. Houses are increasingly threatened by floods and fires in North America, so there's also that. In most of the rented dwellings I've had, the landlord would have to come at least one or twice every year, and make two or three maintenance calls, including stuff like redoing the roof (which comes back every 10 years where I live). However, in the instances where I've had the displeasure of arguing over rent increases, and thus going over the landlord's expenses[^1], these calls never amounted to more than a quarter of the overall rent (with an average closer to 15%). This means that my landlords essentially only spent a few hours of their time to reap North of 10,000 CAD each year. Of course, some of them had to pay mortgage. But this is not an operation cost, it's the cost to get the operation going—to get the priviledge to perceive this revenue with the help of the courts.

[^1]: The tribunal uses a grid based mostly on the landlord's expenses to calculate acceptable rent increases, so that's also what we use in negociations.

Very little business has such high margins, and very little business is as safe, given the support of courts and the inelasticity of the demand. One might point out that other investments would give you more return per asset value units, but I think it's partly a reflection of how attractive it has been as a safe investment (i.e. the value of property has been raised because it's been such a good investment).

To enter in such an investment, the landlord has to rent the unit, and in doing so, what they are renting away is, effectively, the freedom to enjoy that property. There is no way around this: the renter, by living in it, is effectively enjoying that property. And this is why, for example, a renter can call police to prevent a landlord to enter their appartment. The same logic applies to the plans a landlord might have for their property: if a landlord wants to make renovations, and this prevents the renter to enjoy the housing unit, then the renter should have a say in it, and be compensated.

But there's a more profound issue here, because the landlord is not just entering a contract with the renter, but also with society at large. This is the case both because housing is a human right, and thus society and the state has a large stake in the housing market, and because the law and our financial systems assist landlord in their enterprise. The landlord thus comes to control an essential good, one for which he's garanteed that there will always be predictible demand. The downside for controling such a valuable commodity is that they can never have the same rights over them as they have over their own house. Society has to ensure that these dwellings are something that renters can transform into their home, failing which it is society, not the landlords, that will have to pay the costs in loss of productivity, healthcare and general loss of happiness. This is why, for instance, we send inspectors in housing units. What the landlord owns, in other words, is not the freedom to enjoy the housing unit, but the priviledge to maintain it and draw revenue from it. To them, it is an asset, not a good to enjoy.

Finally, one might think that contract transfer, for instance, goes too far. Considered in isolation, it might be: it means that the landlord never knows who they're entering in contract with, because the contract could be transfered to anyone[^2]. That's a considerable risk for small landlords in particular. But it comes against the background of a considerable state intervention in favor of the landlord. Obviously, the state has mechanisms to ensure that renters pay their rents, and sometimes damages as well. But the most important help is probably financial: for instance, houseowners can use RRSPs (essentially, tax shelter accounts) to buy their house, and their expenses on rented units are tax-deducible. Mortgages are built on top of market created by heavily-regulated policies designed to make them safe, accessible, and predictible, with the help of state-provided cheap credit. One might also point out that several policies, urbanistic or otherwise, have been conspiring to keep house values rising faster than inflation fairly consistently since 1945.

EDIT: [^2]: I didn't realize it as I was writing, but this is also a risk that the renter faces: if the landlord sells, the renter becomes contractually bound to the new owner, which can also be a considerable risk.

Perhaps contract transfer is not the best policy to achieve what it achieves (low rent prices in particular), but given all the advantages given to houseowners and landlords, it certainly doesn't seem unfair. A better policy, perhaps, would be to subsize renters instead of houseowners, as the latter are usually better off. The system we have right now has renters pay with their tax for the priviledges landlords enjoy. But there will always be a need for a policy to reign in renting costs, at least as long as its investment value threatens to make it inaccessible to the poor. Contract transfer seems to have do alright at striking a more sustainable balance. The proof is in the pudding: Montreal is still one of the most affordable cities in the Western world, which is part of what makes it a particularly vibrant city.

🏷 housing, policy

To share a thought or add a comment: locha at rawtext dot club.

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